Health Software Giant McKesson Still Hunting Celesio

Despite the failure of its tender offer for Celesio, McKesson is not giving up on European expansion.

NEW YORK (TheStreet) -- Those who thought Obamacare would hammer health care stocks need to eat their words.

Many companies in the sector are on fire. McKesson (MCK), a leader in drug wholesaling and health care IT, is up 65% over the last year. It has decided to invest that money in international expansion.

While its tender offer for Celesio, which might be considered its German counterpart, failed to get the necessary 75% approval yesterday, the deal is not completely dead.

McKesson had raised its offer to 23.50 euros per share (about $32.12) and bought convertible bonds from Elliott International, a major stakeholder, under the assumption the sweetened offer would be accepted. Celesio has a market cap of 3.9 billion euros (about $5.3 billion). McKesson's market cap is $38.9 billion.

Celesio fell by more than a euro per share after the tender's failure was announced, but is trading up today. If the shares decline, that may put more pressure on recalcitrant shareholders to take the higher offer. The latest offer is a 43% premium on Celesio's price before McKesson's first offer was announced.

The larger question is why McKesson moved for Celesio at all. There are some Celesio operations, like the Lloyd's pharmacy chain in England, that seem completely outside McKesson's niche. But the rest of the company is compatible with McKesson.

That compatibility may be the big Obamacare story here. Germany's health care system, with mandatory public and private insurance, is similar to what many envision evolving under Obamacare.

With Western health systems becoming more similar, international consolidation starts to make more sense. In addition to its U.S. distribution system, McKesson is a leader in the health IT market, which was worth $40.4 billion in 2012 and got a $19.2 billion boost from the 2009 American Recovery and Reinvestment Act, which included funds to help clinics and hospitals buy health IT systems.

Unlike the situation in other areas of computing, health industry specialists like McKesson have managed to fight off efforts by mainstream computing companies like Microsoft (MSFT) and Hewlett-Packard (HPQ) to grab a share of the market. Health IT is a complicated sale, and customers don't tend to switch vendors often.